As shop space multiplies, mall owners could take their cue from trends in more advanced markets to stay in the game, writes SHERENE SNG
AFTER a lull of years, Singapore will see a spate of new shopping destinations opening for business from this year. First off the block will be Tampines 1 at Tampines Central and iluma at Victoria Street. This will be followed by the Orchard Road malls - Orchard Central, ION, 313@Somerset and Mandarin Gallery. Close on their heels will be the malls at integrated resorts Marina Bay Sands and Resorts World at Sentosa.
With tourist arrivals falling in the face of the global slowdown and increasing competition from the new kids on the block, existing mall owners and retailers are under immense pressure to remain relevant. To stand head and shoulders above the competition, they have to study consumer behaviour to know what makes shoppers tick. Increasingly, they have to design malls and offer products that cater to consumers' changing lifestyles.
Level One at Far East Plaza, The Heeren and Cathay Cineleisure are examples of malls that successfully cater to the young and trendy. Retailers there enjoy brisk sales and mall owners are reaping good returns.
F&B: Emerging trends
An emerging trend is the reconfiguration of retail space for food and beverage (F&B) use. Whether they are found inside shopping centres or in independent properties, these F&B outlets are drawing crowds and contributing to the changing lifestyles of Singaporeans.
Take Dempsey Hill, for example. It is not uncommon for friends to head there after work or on weekends to 'chill'. What attracts them are the abundant dining and wining options, new-to-Singapore F&B concepts, an atmosphere of laidback charm, a choice of dining indoors or al fresco, and quirky shops.
This trend isn't exactly new. Boat Quay was an early success. However, Boat Quay also shows that owners and operators have to be nimble and sensitive to consumers' changing needs or be overtaken by the competition. Clarke Quay, for instance, is now a more 'happening' place compared with Boat Quay.
This month, iluma, an urban entertainment mall in Victoria Street, opens for business. This development aims to be a unique attraction with a mix of entertainment, thematic dining as well as shopping spaces. Up to 60 per cent of the floor area will be dedicated to entertainment uses so Singaporeans can look forward to a new destination where they can shop, dine and play.
How should mall owners respond to the new malls and fresh trends?
Take the shift to F&B, for example. In older malls, F&B constitutes 10-15 per cent of lettable space.
In more contemporary malls, the proportion is 20-30 per cent. Mall owners have to reconfigure their space to meet new demand. This could come from students looking for a place to hang out, young PMETs (professionals, managers, executives and technicians) gravitating to chill-out joints or families sitting down for a meal together.
Marina Square, Raffles City Shopping Centre and Level One @ Far East Plaza show the results when owners are willing to take a leap of faith, extensively repositioning their malls to create compelling concepts for target customers.
The concepts take into account interior design, ambience as well as the profile of existing retail tenants. The owners then invite suitable operators to implement the concepts. That these malls continue to be favourite shopping destinations are a testament to their success.
Going forward, the challenge is coping with the dramatic increase in retail space. As a comparison, from 1993 to the present, total retail space grew from 2.8 million square metres to 3.2 million sq metres. That's an increase of about 400,000 sq metres, or 14 per cent. But in the next two years, 531,000 sq metres of new retail space will come on the market - much more than the total added in the last 15 years.
In Orchard Road, ION,313@Somerset, Orchard Central and Mandarin Gallery will contribute 180,000 sq metres. The rest will come from Marina Bay Sands and Resorts World, City Square at Kitchener Road and Serangoon Central.
The challenge ahead for mall owners is addressing the downward pressure on rents. For the whole of 2008, overall prime retail rentals saw a rise of 0.8 per cent year-on-year. The retail sector performed impressively in the first half of 2008, with prime retail rentals growing by 13.9 per cent compared with 1H 2007. But the trend reversed in mid-2008 when the global financial crisis struck, resulting in a decline in retail rentals in the second half.
Given the circumstances, retail rents held up well in 2008. Going forward, however, it is imperative for mall owners and retailers to find creative ways to capture consumer attention and stay in the game. They have to look beyond current needs and prepare for competition of the future.
They could take their cue from trends in more advanced economies, like Japan and the US, which will shape lifestyles changes in Singapore. One of these changes will be propelled by the Internet generation. The other, as mentioned, is the changing F&B scene. Operators who capitalise on opportunities presented to them as rents face downward pressure may find themselves well placed when the recovery comes.
The writer is head of retail, Knight Frank Pte Ltd
Source: Business Times, 26 Mar 2009